IDEAS home Printed from https://ideas.repec.org/a/eee/tefoso/v140y2019icp281-295.html
   My bibliography  Save this article

The effects of public subsidies on emerging industry: An agent-based model of the electric vehicle industry

Author

Listed:
  • Sun, Xiaohua
  • Liu, Xiaoling
  • Wang, Yun
  • Yuan, Fang

Abstract

Public subsidies are widely used as policy incentives to promote strategic industry development, especially in emerging industries that depend heavily on the use of new technologies. This study explores the differential effects of consumer subsidies and manufacturer subsidies on the development of new technology in the electric vehicle industry. An agent-based simulation model is constructed which fully considers the individual heterogeneity of consumers and manufacturers in decision-making, with the parameter settings derived from the data of the U.S. automobile market in 2010. Based on robustness tests, the findings suggest that consumer subsidy is more effective than manufacturer subsidy in promoting the popularity and technological breakthrough of electric vehicles. Subsidy intensity and duration are indicated to be important factors for policy effectiveness.

Suggested Citation

  • Sun, Xiaohua & Liu, Xiaoling & Wang, Yun & Yuan, Fang, 2019. "The effects of public subsidies on emerging industry: An agent-based model of the electric vehicle industry," Technological Forecasting and Social Change, Elsevier, vol. 140(C), pages 281-295.
    • Handle: RePEc:eee:tefoso:v:140:y:2019:i:c:p:281-295
    DOI: 10.1016/j.techfore.2018.12.013
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0040162518302695
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.techfore.2018.12.013?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Christopher R. Knittel, 2012. "Reducing Petroleum Consumption from Transportation," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 93-118, Winter.
    2. Horbach, Jens & Rammer, Christian & Rennings, Klaus, 2012. "Determinants of eco-innovations by type of environmental impact — The role of regulatory push/pull, technology push and market pull," Ecological Economics, Elsevier, vol. 78(C), pages 112-122.
    3. Lin, Boqiang & Jiang, Zhujun, 2011. "Estimates of energy subsidies in China and impact of energy subsidy reform," Energy Economics, Elsevier, vol. 33(2), pages 273-283, March.
    4. Nick Johnstone & Ivan Haščič & David Popp, 2010. "Renewable Energy Policies and Technological Innovation: Evidence Based on Patent Counts," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 45(1), pages 133-155, January.
    5. Nicholas Bloom & Mark Schankerman & John Van Reenen, 2013. "Identifying Technology Spillovers and Product Market Rivalry," Econometrica, Econometric Society, vol. 81(4), pages 1347-1393, July.
    6. Jeroen Struben & John D Sterman, 2008. "Transition Challenges for Alternative Fuel Vehicle and Transportation Systems," Environment and Planning B, , vol. 35(6), pages 1070-1097, December.
    7. Skerlos, Steven J. & Winebrake, James J., 2010. "Targeting plug-in hybrid electric vehicle policies to increase social benefits," Energy Policy, Elsevier, vol. 38(2), pages 705-708, February.
    8. Chang, Pao-Long & Ho, Shu-Ping & Hsu, Chiung-Wen, 2013. "Dynamic simulation of government subsidy policy effects on solar water heaters installation in Taiwan," Renewable and Sustainable Energy Reviews, Elsevier, vol. 20(C), pages 385-396.
    9. Brian C. Murray & Maureen L. Cropper & Francisco C. de la Chesnaye & John M. Reilly, 2014. "How Effective Are US Renewable Energy Subsidies in Cutting Greenhouse Gases?," American Economic Review, American Economic Association, vol. 104(5), pages 569-574, May.
    10. Franco Malerba & Richard Nelson & Luigi Orsenigo & Sidney Winter, 2007. "Demand, innovation, and the dynamics of market structure: The role of experimental users and diverse preferences," Journal of Evolutionary Economics, Springer, vol. 17(4), pages 371-399, August.
    11. Shepherd, Simon & Bonsall, Peter & Harrison, Gillian, 2012. "Factors affecting future demand for electric vehicles: A model based study," Transport Policy, Elsevier, vol. 20(C), pages 62-74.
    12. Marino, Marianna & Lhuillery, Stephane & Parrotta, Pierpaolo & Sala, Davide, 2016. "Additionality or crowding-out? An overall evaluation of public R&D subsidy on private R&D expenditure," Research Policy, Elsevier, vol. 45(9), pages 1715-1730.
    13. Martin, Stephen & Scott, John T., 2000. "The nature of innovation market failure and the design of public support for private innovation," Research Policy, Elsevier, vol. 29(4-5), pages 437-447, April.
    14. Hoeffler, Steve & Ariely, Dan & West, Pat, 2006. "Path dependent preferences: The role of early experience and biased search in preference development," Organizational Behavior and Human Decision Processes, Elsevier, vol. 101(2), pages 215-229, November.
    15. Gallagher, Kelly Sims & Muehlegger, Erich, 2011. "Giving green to get green? Incentives and consumer adoption of hybrid vehicle technology," Journal of Environmental Economics and Management, Elsevier, vol. 61(1), pages 1-15, January.
    16. Peters, Michael & Schneider, Malte & Griesshaber, Tobias & Hoffmann, Volker H., 2012. "The impact of technology-push and demand-pull policies on technical change – Does the locus of policies matter?," Research Policy, Elsevier, vol. 41(8), pages 1296-1308.
    17. Kwon, Yeongmin & Son, Sanghoon & Jang, Kitae, 2018. "Evaluation of incentive policies for electric vehicles: An experimental study on Jeju Island," Transportation Research Part A: Policy and Practice, Elsevier, vol. 116(C), pages 404-412.
    18. Wu, Geng & Inderbitzin, Alessandro & Bening, Catharina, 2015. "Total cost of ownership of electric vehicles compared to conventional vehicles: A probabilistic analysis and projection across market segments," Energy Policy, Elsevier, vol. 80(C), pages 196-214.
    19. Chad Cotti & Mark Skidmore, 2010. "The Impact of State Government Subsidies and Tax Credits in an Emerging Industry: Ethanol Production 1980–2007," Southern Economic Journal, John Wiley & Sons, vol. 76(4), pages 1076-1093, April.
    20. Silveira, Jose Luz & Tuna, Celso Eduardo & Lamas, Wendell de Queiroz, 2013. "The need of subsidy for the implementation of photovoltaic solar energy as supporting of decentralized electrical power generation in Brazil," Renewable and Sustainable Energy Reviews, Elsevier, vol. 20(C), pages 133-141.
    21. Noori, Mehdi & Tatari, Omer, 2016. "Development of an agent-based model for regional market penetration projections of electric vehicles in the United States," Energy, Elsevier, vol. 96(C), pages 215-230.
    22. Colombo, Massimo G. & Grilli, Luca & Murtinu, Samuele, 2011. "R&D subsidies and the performance of high-tech start-ups," Economics Letters, Elsevier, vol. 112(1), pages 97-99, July.
    23. Driscoll, Áine & Lyons, Seán & Mariuzzo, Franco & Tol, Richard S.J., 2013. "Simulating demand for electric vehicles using revealed preference data," Energy Policy, Elsevier, vol. 62(C), pages 686-696.
    24. Hidrue, Michael K. & Parsons, George R. & Kempton, Willett & Gardner, Meryl P., 2011. "Willingness to pay for electric vehicles and their attributes," Resource and Energy Economics, Elsevier, vol. 33(3), pages 686-705, September.
    25. Frondel, Manuel & Ritter, Nolan & Schmidt, Christoph M. & Vance, Colin, 2010. "Economic impacts from the promotion of renewable energy technologies: The German experience," Energy Policy, Elsevier, vol. 38(8), pages 4048-4056, August.
    26. Dominique Finon & Philippe Menanteau, 2003. "The Static and Dynamic Efficiency of Instruments of Promotion of Renewables," Post-Print halshs-00001300, HAL.
    27. Xingping Zhang & Jian Xie & Rao Rao & Yanni Liang, 2014. "Policy Incentives for the Adoption of Electric Vehicles across Countries," Sustainability, MDPI, vol. 6(11), pages 1-23, November.
    28. Herbert Dawid & Marc Reimann, 2011. "Diversification: a road to inefficiency in product innovations?," Journal of Evolutionary Economics, Springer, vol. 21(2), pages 191-229, May.
    29. Helveston, John Paul & Liu, Yimin & Feit, Elea McDonnell & Fuchs, Erica & Klampfl, Erica & Michalek, Jeremy J., 2015. "Will subsidies drive electric vehicle adoption? Measuring consumer preferences in the U.S. and China," Transportation Research Part A: Policy and Practice, Elsevier, vol. 73(C), pages 96-112.
    30. Mowery, David & Rosenberg, Nathan, 1993. "The influence of market demand upon innovation: A critical review of some recent empirical studies," Research Policy, Elsevier, vol. 22(2), pages 107-108, April.
    31. Jeroen Struben & John D. Sterman, 2008. "Transition Challenges for Alternative Fuel Vehicle and Transportation Systems," Post-Print hal-02312277, HAL.
    32. Sierzchula, William & Bakker, Sjoerd & Maat, Kees & van Wee, Bert, 2014. "The influence of financial incentives and other socio-economic factors on electric vehicle adoption," Energy Policy, Elsevier, vol. 68(C), pages 183-194.
    33. Girod, Bastien & Stucki, Tobias & Woerter, Martin, 2017. "How do policies for efficient energy use in the household sector induce energy-efficiency innovation? An evaluation of European countries," Energy Policy, Elsevier, vol. 103(C), pages 223-237.
    34. Diamond, David, 2009. "The impact of government incentives for hybrid-electric vehicles: Evidence from US states," Energy Policy, Elsevier, vol. 37(3), pages 972-983, March.
    35. Clinton Andrews & David DeVault, 2009. "Green Niche Market Development," Journal of Industrial Ecology, Yale University, vol. 13(2), pages 326-345, April.
    36. Nill, Jan & Kemp, Ren, 2009. "Evolutionary approaches for sustainable innovation policies: From niche to paradigm?," Research Policy, Elsevier, vol. 38(4), pages 668-680, May.
    37. Klaassen, Ger & Miketa, Asami & Larsen, Katarina & Sundqvist, Thomas, 2005. "The impact of R&D on innovation for wind energy in Denmark, Germany and the United Kingdom," Ecological Economics, Elsevier, vol. 54(2-3), pages 227-240, August.
    38. Nemet, Gregory F., 2009. "Demand-pull, technology-push, and government-led incentives for non-incremental technical change," Research Policy, Elsevier, vol. 38(5), pages 700-709, June.
    39. Arslan, Okan & Yıldız, Barış & Ekin Karaşan, Oya, 2014. "Impacts of battery characteristics, driver preferences and road network features on travel costs of a plug-in hybrid electric vehicle (PHEV) for long-distance trips," Energy Policy, Elsevier, vol. 74(C), pages 168-178.
    40. Shafiei, Ehsan & Davidsdottir, Brynhildur & Fazeli, Reza & Leaver, Jonathan & Stefansson, Hlynur & Asgeirsson, Eyjolfur Ingi, 2018. "Macroeconomic effects of fiscal incentives to promote electric vehicles in Iceland: Implications for government and consumer costs," Energy Policy, Elsevier, vol. 114(C), pages 431-443.
    41. Costantini, Valeria & Crespi, Francesco & Martini, Chiara & Pennacchio, Luca, 2015. "Demand-pull and technology-push public support for eco-innovation: The case of the biofuels sector," Research Policy, Elsevier, vol. 44(3), pages 577-595.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nuñez-Jimenez, Alejandro & Knoeri, Christof & Hoppmann, Joern & Hoffmann, Volker H., 2022. "Beyond innovation and deployment: Modeling the impact of technology-push and demand-pull policies in Germany's solar policy mix," Research Policy, Elsevier, vol. 51(10).
    2. Soares, N. & Martins, A.G. & Carvalho, A.L. & Caldeira, C. & Du, C. & Castanheira, É. & Rodrigues, E. & Oliveira, G. & Pereira, G.I. & Bastos, J. & Ferreira, J.P. & Ribeiro, L.A. & Figueiredo, N.C. & , 2018. "The challenging paradigm of interrelated energy systems towards a more sustainable future," Renewable and Sustainable Energy Reviews, Elsevier, vol. 95(C), pages 171-193.
    3. Harrison, Gillian & Thiel, Christian, 2017. "An exploratory policy analysis of electric vehicle sales competition and sensitivity to infrastructure in Europe," Technological Forecasting and Social Change, Elsevier, vol. 114(C), pages 165-178.
    4. Cantner, Uwe & Graf, Holger & Herrmann, Johannes & Kalthaus, Martin, 2016. "Inventor networks in renewable energies: The influence of the policy mix in Germany," Research Policy, Elsevier, vol. 45(6), pages 1165-1184.
    5. Costantini, Valeria & Crespi, Francesco & Martini, Chiara & Pennacchio, Luca, 2015. "Demand-pull and technology-push public support for eco-innovation: The case of the biofuels sector," Research Policy, Elsevier, vol. 44(3), pages 577-595.
    6. Zhang, Qi & Li, Hailong & Zhu, Lijing & Campana, Pietro Elia & Lu, Huihui & Wallin, Fredrik & Sun, Qie, 2018. "Factors influencing the economics of public charging infrastructures for EV – A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 94(C), pages 500-509.
    7. Makena Coffman & Paul Bernstein & Sherilyn Wee, 2017. "Electric vehicles revisited: a review of factors that affect adoption," Transport Reviews, Taylor & Francis Journals, vol. 37(1), pages 79-93, January.
    8. Valeria Costantini & Francesco Crespi & Alessandro Palma, 2015. "Characterizing the policy mix and its impact on eco-innovation in energy-efficient technologies," SEEDS Working Papers 1115, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Jun 2015.
    9. Clement Bonnet, 2020. "Measuring Knowledge with Patent Data: an Application to Low Carbon Energy Technologies," Working Papers hal-02971680, HAL.
    10. Tilmann Rave & Ursula Triebswetter & Johann Wackerbauer, 2013. "Koordination von Innovations-, Energie- und Umweltpolitik," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 61.
    11. Lee, Yongseung & Kim, Chongman & Shin, Juneseuk, 2016. "A hybrid electric vehicle market penetration model to identify the best policy mix: A consumer ownership cycle approach," Applied Energy, Elsevier, vol. 184(C), pages 438-449.
    12. Oliveira, Gabriela D. & Roth, Richard & Dias, Luis C., 2019. "Diffusion of alternative fuel vehicles considering dynamic preferences," Technological Forecasting and Social Change, Elsevier, vol. 147(C), pages 83-99.
    13. Clément Bonnet, 2016. "Measuring Knowledge with Patent Data: an Application to Low Carbon Energy Technologies," EconomiX Working Papers 2016-37, University of Paris Nanterre, EconomiX.
    14. Clément Bonnet, 2017. "Measuring Inventive Performance with Patent Data: an Application to Low Carbon Energy Technologies," Working Papers 1709, Chaire Economie du climat.
    15. Sam Aflaki & Syed Abul Basher & Andrea Masini, 2015. "Does Economic Growth Matter? Technology-Push, Demand-Pull and Endogenous Drivers of Innovation in the Renewable Energy Industry," Working Papers hal-02011423, HAL.
    16. Jiali Yu & Peng Yang & Kai Zhang & Faping Wang & Lixin Miao, 2018. "Evaluating the Effect of Policies and the Development of Charging Infrastructure on Electric Vehicle Diffusion in China," Sustainability, MDPI, vol. 10(10), pages 1-25, September.
    17. Gnann, Till & Stephens, Thomas S. & Lin, Zhenhong & Plötz, Patrick & Liu, Changzheng & Brokate, Jens, 2018. "What drives the market for plug-in electric vehicles? - A review of international PEV market diffusion models," Renewable and Sustainable Energy Reviews, Elsevier, vol. 93(C), pages 158-164.
    18. Xu, Lei & Su, Jun, 2016. "From government to market and from producer to consumer: Transition of policy mix towards clean mobility in China," Energy Policy, Elsevier, vol. 96(C), pages 328-340.
    19. Hoppmann, Joern & Wu, Geng & Johnson, Jillian, 2021. "The impact of demand-pull and technology-push policies on firms’ knowledge search," Technological Forecasting and Social Change, Elsevier, vol. 170(C).
    20. Ken’ichi Matsumoto & Yui Nakamine & Sunyong Eom & Hideki Kato, 2021. "Demographic, Social, Economic, and Regional Factors Affecting the Diffusion of Hybrid Electric Vehicles in Japan," Energies, MDPI, vol. 14(8), pages 1-14, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:tefoso:v:140:y:2019:i:c:p:281-295. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.sciencedirect.com/science/journal/00401625 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.